Raytheon to Cut 5,200 Jobs Across Southland
In a sharp and unexpected blow to the Southern California aerospace industry, Raytheon Co. announced Friday that it will eliminate 5,200 jobs at facilities stretching from Santa Barbara to San Diego during the next two years.
The brunt of the cuts will fall on the former Hughes Aircraft enclave in El Segundo, where several major buildings will be vacated, some manufacturing operations shipped out of state and 1,100 employees will lose their jobs. Layoffs will start next month.
The cutbacks in California amount to a staggering 60% of the 8,700 jobs Raytheon will eliminate nationwide. The company is hoping to save $1.7 billion annually by paring overlapping capacity, resulting from its acquisitions last year of Hughes Aircraft, E-Systems and the defense operations of Texas Instruments.
The Raytheon downsizing comes just as the California aerospace industry was emerging from a long post-Cold War slump and showing pockets of growth in the booming commercial aircraft market.
But the massive layoffs demonstrate that the industry remains in turmoil, with major uncertainties looming under feeble Pentagon budgets. Another major restructuring is likely when Lockheed Martin completes its purchase of Northrop Grumman in several months.
California state officials were shocked by the severity of the cutbacks, saying Raytheon had declined an offer by Gov. Pete Wilson to discuss whether the state could create an economic incentive package to help retain more jobs.
“We are surprised by the magnitude,” said Chris Holben, undersecretary for the California Trade and Commerce Agency. “This is clearly something we don’t want to see. It is demoralizing.”
Raytheon officials insisted that they did not target California for a disproportionate hit, saying they examined all of their operations and spared only the best facilities, letting “the chips fall where they may.”
“We believe the process was totally fair,” said William H. Swanson, chairman and chief executive officer of Raytheon Systems Co., the firm’s newly formed defense unit.
The firm, based in Lexington, Mass., is maintaining a sizable presence in California with 11,600 jobs, ranking behind industry leaders Boeing and Lockheed Martin.
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In total, Raytheon is closing 20 plants nationwide, hitting communities from Indiana to Florida and Texas to Massachusetts. Included in the shutdowns are six plants and portions of three other complexes in California.
The firm will shutter facilities in Westchester, Torrance, Irvine, Santa Barbara, San Diego and the northern San Diego County community of Sycamore Canyon. Meanwhile, it will open a facility in Chula Vista to consolidate operations of Pseveral plants being shut down. The reorganization is moving production of such items as printed circuit boards, electro-optical systems and torpedoes outside California.
Raytheon is not shutting down all of the sprawling operations in El Segundo, but consolidating at the newest facility, built in the mid-1980s along El Segundo Boulevard. Meanwhile, the company is closing a number of older buildings clustered along Imperial Highway.
Despite company assurances that the firm wants to protect and nurture its engineering resources in California, anxiety levels were high for engineer Mike Menendez.
“The rumor mill says engineers are staying here, but who knows what these bigwigs are going to do,” he said. “You’d be a fool not to worry.”
The mood was similarly downbeat in Irvine, where Raytheon Service Co. will be shut down. The future for the plant’s 220 workers, who repair air traffic control equipment and naval electronics, is unclear.
“They’re saying we all have to reapply for jobs,” said Jorge Correa, an employee who supports a wife and five children on about $11 an hour. “What it means is there are going to be some cuts in the money.”
Raytheon is laying off 1,500 hourly workers and 3,700 technical and administrative employees in California. The firm said it would offer termination benefits but gave no details. Those to be laid off here amount to 10% of Raytheon’s 87,000 defense workers nationwide.
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Company officials could offer no precise answer to why California fared so badly in the consolidation plan. The firm, for example, cut only 300 jobs at its home state operations in Massachusetts, which is widely regarded as having a high cost structure similar to Southern California’s.
“The folks at Raytheon are certainly more familiar with the operations of Raytheon and less familiar with the operations at Hughes Aircraft,” said aerospace financier Robert Paulson of Aerostar Capital. “Familiarity breeds optimism and compassion.”
Another aerospace expert said, “It sounds like a decision coming out of Massachusetts.”
But Raytheon officials said the evaluation process was exhaustive and not based on parochial issues, adding that a former Hughes executive headed the team examining company facilities.
Rather, Raytheon officials said, Hughes was not positioned for the tough 1990s aerospace environment because of its decentralized management style under its prior owners, General Motors Corp. and the Howard Hughes Medical Institute. Many of Hughes’ facilities did not get the attention and investment necessary to keep them current, as a result of the autonomy granted to various units in that company. Even if Raytheon had not acquired Hughes, it isn’t clear that the latter firm could have operated successfully in its existing facilities, Raytheon executives added.
Despite the cuts, Swanson noted that Raytheon selected El Segundo as the headquarters for its sensors and electronic systems segment, which includes the former Hughes airborne radar business. Raytheon has also chosen to make Hughes’ former Santa Barbara Research Center one of its key “centers of excellence” for technology involving infrared focal plane arrays.
Raytheon’s restructuring stands in stark contrast to the recent consolidations at Boeing and Lockheed Martin, which have not made deep cuts in California. Boeing has not transferred any operation out of this state and may move new work to its Douglas Products in Long Beach. Lockheed relocated production of commercial satellites to California in a 1996 consolidation.
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Times correspondent Stephen Gregory and staff writer E. Scott Reckard contributed to this story.
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* AEROSPACE PROSPECTS
Despite Raytheon’s 5,200 job cuts in Southland, aerospace’s future is bright, experts say. D1
